Lean Corporation provided the following information regarding its Notes Receivable as at December 31, 2021. NOTE GROSS CARRYING AMOUNT LIFETIME EXPECTED CREDIT LOSSES 12-MONTH EXPECTED CREDIT LOSSES CREDIT RISK ASSESSMENT A P 3,000,000 P 300,000 P 50,000 Low credit risk B 2,000,000 400,000 40,000 31 days past due C 1,000,000 500,000 60,000 Credit-impaired The loss allowance that the entity should recognize as at December 31, 2021 is A. P 590,000 B. P 900,000 B. P 950,000 C. P 1,200,000
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
. Lean Corporation provided the following information regarding its Notes Receivable as at December 31, 2021.
|
NOTE |
GROSS CARRYING AMOUNT |
LIFETIME EXPECTED CREDIT LOSSES |
12-MONTH EXPECTED CREDIT LOSSES |
CREDIT RISK ASSESSMENT |
|
A |
P 3,000,000 |
P 300,000 |
P 50,000 |
Low credit risk |
|
B |
2,000,000 |
400,000 |
40,000 |
31 days past due |
|
C |
1,000,000 |
500,000 |
60,000 |
Credit-impaired |
The loss allowance that the entity should recognize as at December 31, 2021 is
A. P 590,000
B. P 900,000
B. P 950,000
C. P 1,200,000
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